Telegram Cancels Plans for Public Initial Coin Offering

Messaging app Telegram has no plans to go forward with a public initial coin offering (ICO), having successfully raised $1.7 billion in its ICO pre-sale to private investors.

Telegram Group Inc. raised its enormous warchest with contributions from fewer than 200 private investors. The pre-sale came in two stages, an unusual occurrence in an investing climate where one bite at the private fundraising apple is the norm.

The first pre-ICO took place from January 29 to February 13, and managed to attract $850 million from 81 investors, followed by the unusual second round fund-raise, which also garnered $850 million.

A notice filed with the US Securities and Exchange Commission (SEC) indicates 94 different entities took part in the second round of the pre-ICO, which started on March 14. The identities of individuals and companies investing in the ICO have not been disclosed.

Bloomberg reported that investors were placing orders in the second round even after the token was priced at more than triple the initial level. During the pre-ICO, the Gram tokens were sold at around $0.38. The price during the second round was $1.33 per coin.

The ICO was undertaken using Federal Exemption 506(c) guidelines, which state that “a company can broadly solicit and generally advertise the offering and still be deemed to be in compliance with the exemption’s requirements” so long as certain conditions are met.

Telegram is seeking to build its own blockchain network called the TON Network with Telegram tokens built-in, enabling much faster transaction speeds than rival blockchain networks. It is raising funds to build this network, rent servers, boost the number of users, and pay operating expenses.

Speculation as to why Telegram has cancelled its public ICO centers on regulators, who are increasingly active in scrutiny on all offerings, which they believe constitute securities and would be subject to the same restrictions as stock sales.